
LETTER FROM THE EDITOR
Our Ethics Corner feature has generated some feedback, and this month we are revisiting the first case study we presented. As expected, there is room for differences of opinion on ethics questions.
In part, the growth of international membership in the MTA should guarantee some discussion on ethics. Laws differ among countries and cultural differences are greater than many assume. Perhaps the only undeniable truth in ethics is that people are not all alike. Different people hold different opinions, which is the underlying reason we have a market to trade.
While cultural differences must be considered in any situation, the Standards defined in the MTA Code of Ethics are mandatory for all members and affiliates. While there may be a less strict requirement defined in local laws at times, the Code of Ethics requires that the stricter rules of the Code must be the guide. Obviously if the law is stricter than the Code of Ethics, the Code does not offer an excuse for breaking the law.
We look forward to continuing discussions on ethics. It is important to our profession to hear as many opinions as possible. By understanding why some scenarios present “grey zones” we can make professional ethics stronger. Please send any comments to editor@mta.org.
Sincerely,
Mike Carr, CMT
What's Inside...
TWO BRIEF ESSAYS WITH A COMMON CONCLUSION
by George RahalThese essays discuss discrepancies in modern portfolio theory (MPT) that can be resolved by technical analysis. In portfolio theory, asset classes’ correlations with other asset classes, their...
CHARLES HENRY DOW
by George A. Schade, Jr., CMTCharles Dow was born in Sterling, Connecticut, on November 6, 1851. He was first and foremost a newspaperman. When he was 21 years old, he apprenticed for six years at the Springfield, Massachusetts...
SPIRITED LATE BIDDING PUSHES MTAEF’s 3RD AUCTION OVER THE TOP
by Bruce Kamich, CMTFor the third year, the Market Technicians Association Educational Foundation (www.mtaef.org) “Take an Analyst to Lunch or Dinner” was a success! Over the summer, a global collection of top-shelf...
WHY RSI MAY BE ONE OF THE BEST SHORT-TERM INDICATORS
by Laurence ConnorsThis article was originally published in 2007, and was based on research involving 7,050,517 trades from Jan 1, 1995 to June 30, 2006. We applied a price and liquidity filter that required all stocks...
MAVERICK BY TRADERMADE
by Michael Carr, CMTMaverick is the charting platform available from TraderMade. This is an extremely versatile package, with full charting and trading functionality combined with a comprehensive news and analysis...
THE LAYMAN’S GUIDE TO TRADING STOCKS BY DAVE LANDRY
by Michael Carr, CMTThis book, Dave Landry’s third, is a how-to guide for traders of all skill levels. It provides detailed and precise instructions on how to trade and analyze the markets, including enough...
INTERVIEW WITH DAVE LANDRY
by Dave Landry & Amber Hestla-BarnhartHow would you describe your job? I trade my own personal accounts and have a retail and institutional consulting business. My 11 year old daughter described it the best: “My dad looks at charts all...
THE LITTLE BOOK OF TRADING BY MICHAEL COVEL
by Ajay G. Jani, CMTTrend-following methods have been successfully utilized by generations of traders to build attractive return streams while reducing risk of catastrophic outcomes. Jesse Livermore, George Soros, John...
ETHICS CORNER
by Michael Carr, CMTIn the September issue of Technically Speaking, we presented a case study where a CMT candidate stumbled upon information about a pending takeover while working in a part-time job that was unrelated...
β = 1 DOES A BETTER JOB THAN CALCULATED BETAS
by Pablo Fernández & Vicente J. BermejoEditor’s note: This article is a detailed look at an indicator traditionally used in fundamental analysis. It is also an exploration of an important part of technical analysis. As a measure of...
MTA SEEKING NEW HIRE: DIRECTOR, CMT STUDIES
The CMT Board of Governors (BoG) is pleased to announce the creation of the full time position of Director, CMT Studies. The immediate responsibility of this position is the development and...
These essays discuss discrepancies in modern portfolio theory (MPT) that can be resolved by technical analysis. In portfolio theory, asset classes’ correlations with other asset classes, their standard deviation of returns, and their expected returns are the only inputs needed to create a “global market portfolio,” which can be defined as the an optimal portfolio, whose cumulative weightings of all asset classes maximize the expected return per unit of risk. Of the three variables, two are the result of similar statistical operations. Holding an asset class in isolation, it is comprised of a standard deviation and an expected return. As such, these two variables are a corner stone of MPT. The two essays that follow present issues surrounding these variables. Essay I: The New Liquidity Premium The standard deviation of returns is one definition of risk for an asset class. Assuming this is a valid definition, there still remains an inadequacy in its
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Contributor(s)

George Rahal
George Rahal has been writing about financial markets for several years. He began his career in Lazard Capital Markets’ equity research department. He has since been involved in technical research and trading, which he applies in his current role at Landor Capital...
Charles Dow was born in Sterling, Connecticut, on November 6, 1851. He was first and foremost a newspaperman. When he was 21 years old, he apprenticed for six years at the Springfield, Massachusetts Springfield Republican newspaper. He then moved to Rhode Island. In 1879, while working for The Providence Journal, he was sent to Leadville, Colorado, to write about the “Silver Rush”. His five “Leadville Letters” or articles marked his first career achievement. Shortly after returning to Rhode Island, Dow moved to New York City. In 1882, with Edward Jones, he founded Dow Jones & Company. Shortly thereafter, he began publishing a two-page newspaper called The Customer’s Afternoon Letter, a compilation of current financial news and stock prices. Dow became a member of the New York Stock Exchange in 1886. The New York Times featured a story on his initiation in January 1, 1886 (Figure 1). Figure 1: Dow Joins the NYSE On July
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

George A. Schade, Jr., CMT
George A. Schade, Jr., who holds a Chartered Market Technician (CMT) designation, has written extensively about the people and innovations that have advanced the field of technical analysis within financial markets. A member of the CMT Association since 1987, he has written...
For the third year, the Market Technicians Association Educational Foundation (www.mtaef.org) “Take an Analyst to Lunch or Dinner” was a success! Over the summer, a global collection of top-shelf analysts and traders was assembled. This year volunteers ranged from the Far East (Marc Faber) to Switzerland (Felix Zulauf) to London (Tony Plummer), and an “A to Z list” here in the United States from the east to west coasts. Some bids came in early and ramped up quickly and, for others, the bidding came in late but furious. When the 10-day auction window closed, one winner donated $3,310 to take Dan Zanger to lunch or dinner! Mr. Zanger has since agreed to a lunch or dinner with an unsuccessful bidder who kindly matched the $3,310 bid! You can meet him on November 8th at the MTAEF Annual Fundraising event at Baruch College in New York City (http://go.mta.org/157). Marc Faber was also very popular with
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Bruce Kamich, CMT
Bruce M. Kamich, who has held the Chartered Market Technician (CMT) designation since 1992, is a technical analyst for TheStreet.com and a two-time past president of the CMT Association. He serves as an advisor for the Technical Analysis Educational Foundation, of which he is...
This article was originally published in 2007, and was based on research involving 7,050,517 trades from Jan 1, 1995 to June 30, 2006. We applied a price and liquidity filter that required all stocks be priced above $5 and have a 100-day moving average of volume greater than 250,000 shares. This research has been updated through 2010 and currently involves 11,022,431 simulated trades. We consider the Relative Strength Index (RSI) to be one of the best indicators available. There are a number of books and articles written about RSI, how to use it, and the value it provides in predicting the short-term direction of stock prices. Unfortunately, few, if any, of these claims are backed up by statistical studies. This is very surprising considering how popular RSI is as an indicator and how many traders rely upon it. Most traders use the 14-period RSI, but our studies have shown that statistically, there
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Laurence Connors
Laurence Connors is Chairman of The Connors Group (TCG), and the principal executive officer of Connors Research LLC. TCG is a financial markets information company that publishes daily commentary and insight concerning the financial markets and has twice...
Maverick is the charting platform available from TraderMade. This is an extremely versatile package, with full charting and trading functionality combined with a comprehensive news and analysis service known as InterpreTA. TraderMade has been providing charting solutions since 1984. It is a company that supports the highest professional standards in technical analysis. Most positions at the company require that the individual will be expected to complete a Diploma in Technical Analysis from the STA (or IFTA or MTA), and they are expected to begin the program shortly after starting work with TraderMade. The commitment to technical analysis is obvious in their products. The software offers the typical suite of technical analysis tools. All indicators and drawing tools are easily accessible via menus or shortcuts. An example screen shot is shown below, with Fibonacci levels, moving averages, trend lines and annotations added to the chart. Among the less well known indicators offered in Maverick
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Michael Carr, CMT
Mike Carr, who holds a Chartered Market Technician (CMT) designation, is a full-time trader and contributing editor for Banyan Hill Publishing, a leading investment newsletter service. He is an instructor at the New York Institute of Finance and a contributor to various...
This book, Dave Landry’s third, is a how-to guide for traders of all skill levels. It provides detailed and precise instructions on how to trade and analyze the markets, including enough information so that someone with no experience could begin trading after reading the book. Unusual for a book that meets the needs of beginning traders, “The Layman’s Guide to Trading Stocks” also includes descriptions of techniques that the most experienced traders and analysts can benefit from. The author walks through his personal work routine, a valuable resource for professionals. Many market analysts have developed their own work processes without knowing how other professionals complete their work, and a detailed glimpse into another successful professional’s day can be helpful. You may not decide to adopt any of the trading or analytical techniques that are highlighted in the book, but will still benefit from thinking about whether your approach is as disciplined
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Michael Carr, CMT
Mike Carr, who holds a Chartered Market Technician (CMT) designation, is a full-time trader and contributing editor for Banyan Hill Publishing, a leading investment newsletter service. He is an instructor at the New York Institute of Finance and a contributor to various...
How would you describe your job? I trade my own personal accounts and have a retail and institutional consulting business. My 11 year old daughter described it the best: “My dad looks at charts all day.” What led you to look at the particular markets you specialize in as opposed to another tradable? I trade mostly stocks but I will trade other markets. Less efficient markets tend to trend better than well watched markets. Those more efficient markets are a crowded playing field. Participants often cancel each other out. This makes for choppy trading. Someone’s not going to wake up tomorrow and say, hey, there’s this thing called the Emini or the EUR/USD. Somewhat less liquid stocks (within reason) can have some really nice trends as they are discovered. This is not to say that I won’t ever trade a market like Forex. You just have to pick your spots carefully. In more
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Dave Landry
Dave Landry has been have been actively trading the markets since the early 90s. In 1995 he founded Sentive Trading, LLC, a trading and consulting firm. He is author of Dave Landry on Swing Trading (2000), Dave Landry’s 10 Best Swing Trading Patterns & Strategies (2003),...

Amber Hestla-Barnhart
Bio coming
Trend-following methods have been successfully utilized by generations of traders to build attractive return streams while reducing risk of catastrophic outcomes. Jesse Livermore, George Soros, John W. Henry and Ed Seykota are just a few of the luminary traders that have used trend-following strategies to make millions (or billions) during a variety of economic environments. During the last decade, no-one has worked harder to bring these trading techniques into the public light than author Michael Covel. Covel’s initial goal was to be a trader, and he started by asking a very simple question: “Who were the biggest market winners, and what were they doing differently that allowed them to succeed in an arena littered with failure?” His research eventually led him to trend-following; Covel became so enmeshed in his research that he decided to shift his focus from becoming a trader to helping the public learn about the methods that he had
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Ajay G. Jani, CMT
Ajay G. Jani, who holds a Chartered Market Technician (CMT) designation, is the Managing Partner and CIO of Single A Capital. He has been in the investment business as a technical analyst since 1989, and was previously the Managing Director of Gramercy, an asset management...
In the September issue of Technically Speaking, we presented a case study where a CMT candidate stumbled upon information about a pending takeover while working in a part-time job that was unrelated to any professional investing activity. Our conclusion was that the candidate could not act on the information without violating the MTA Code of Ethics. A reader offered the following rebuttal: “I do not agree with your answer to the Ethics Corner question about the CMT candidate who came by a draft press release while engaged in cleaning an office. The protagonist did not know whether the draft press release reflected the current thinking of the investment bank. If the bank changed its mind, the discarded press release would be of no use. It is true that CMTs are required to be scrupulously above suspicion regarding non-public information. But then, so are bankers. If the banker was careless enough to not shred the
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Michael Carr, CMT
Mike Carr, who holds a Chartered Market Technician (CMT) designation, is a full-time trader and contributing editor for Banyan Hill Publishing, a leading investment newsletter service. He is an instructor at the New York Institute of Finance and a contributor to various...
Editor’s note: This article is a detailed look at an indicator traditionally used in fundamental analysis. It is also an exploration of an important part of technical analysis. As a measure of excess returns, beta is actually a measure of relative strength and is therefore also a technical tool. This article demonstrates that the tools fundamental analysts use are no more stable than traditional technical indicators and an analyst needs to apply judgment to any indicator within a defined framework. It also demonstrates that beta, and relative strength, vary over time. This shows that portfolio selection is a dynamic process. There is more math in this paper than seen in the typical article that appears in this newsletter. Technicians may want to consider applying more mathematical logic to the tools they use, a nontraditional approach to technical analysis but one that does have some merit. We have also removed most of the
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Contributor(s)

Pablo Fernández
Pablo Fernández is Professor of Financial Management PricewaterhouseCoopers Chair of Corporate Finance / Nissan Chair of Corporate Strategy and International Competitiveness Finance at IESE Business School in Madrid, Spain. Prof. Fernández was awarded his Ph.D. and M.A. in...

Vicente J. Bermejo
Vicente J. Bermejo, a research assistant at IESE can be reached at
The CMT Board of Governors (BoG) is pleased to announce the creation of the full time position of Director, CMT Studies. The immediate responsibility of this position is the development and integration of CMT study materials, including Learning Outcome Statements and a customized curriculum for our candidates. This full time staff member will also participate in coordinating the work of Subject Matter Experts in the preparation of CMT exams. This position will report to the Executive Director of the MTA, with a strong working relationship to the Chairperson of the BoG and the BoG itself. The ideal candidate will have, as a minimum, a graduate level degree and at least 5 years of relevant teaching experience, with an emphasis on distance learning. They will have a strong, comprehensive knowledge of the financial markets, with the Chartered Market Technician (CMT) designation preferred, but not required. This individual must have excellent verbal and
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
New Educational Content This Month
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December 6, 2023
Marrying Fundamental and Technical Analysis for Independent RIAs
Presenter(s): David Rath
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November 22, 2023
Utilizing Trend & Mean Reversion in Breadth Studies to Gauge Market Conditions
Presenter(s): Victor Riesco
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November 18, 2023
Beating the Bench
Presenter(s): Scott Brown, CMT